Clause 1. — (Rates of Tax, etc.)

Part of Orders of the Day — Profits Tax Bill – in the House of Commons at 12:00 am on 9 November 1949.

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Photo of Sir Alexander Spearman Sir Alexander Spearman , Scarborough and Whitby 12:00, 9 November 1949

I gather from your Ruling, Mr. Bowles, that it would be out of Order to attempt to answer the hon. Member's question as to how labour should be encouraged to move into the export trades. I shall content myself with one sentence by saying that on this side of the Committee, we would much prefer to do it by incentives than by the measure of direction that the Home Secretary appears to advocate.

The object of devaluation presumably is to encourage industry to expand in the export trade. The Chancellor must have realised the urgency of this, even though he did it rather late in the day, because obviously a very heavy price has to be paid. There is a general cut in the standard of living, in the social services and in pensions. Therefore, there must have been in the Chancellor's mind a very urgent need to encourage the export trade. He must have realised that it is not a question of traders altering labels and directing goods to America instead of to Europe. It means the undertaking of a considerable risk and a great re-organising of their businesses. At a time when, owing to the inflationary conditions created by the Government at home, it is so very easy to sell at home, there has to be an immense inducement to make it worth while to sell abroad.

In so far as the Chancellor brings in a tax on traders who export, to that extent he is quite clearly discouraging exporting. He is therefore taking away with his left hand what he has given with his right. That would seem to me to be a very clumsy and expensive way of doing it. Or is it, in fact, that he thought he had fixed devaluation too low and must counteract it by that clumsy method? There is no indication that it is so, as the premium was 35 per cent. before devaluation and fell to 5 per cent. after, and is now back to 21 per cent.

The Chancellor has told us in his own words that the Government have rushed from one expedient to another and that as each series of expedients became exhausted a crisis has arisen. In this case the Chancellor seems to have gone rather further, and in a panic to be attempting to rush in two opposite directions at one time. If this is a bad tax, as I believe it to be, it ought at any rate to be much less bad if the Amendment of my hon. Friend is adopted, and if this discouragement to exporting is dropped from it. In fact, I suggest that if the Chancellor were a realist he would actually go further. He might even consider not taxing those companies which are doing well. It is the companies that are doing badly which need to be taxed, because in the present situation the Government have created conditions of abnormal profits in order to keep employment at full level until the General Election.